Andorra has one of the most attractive tax systems in the old continent.
Thanks to it, well-known spanish personalities such as El Rubius, Pol and Aleix Espargaró, TheGrefg, Willyrex, Vegetta, Alex Rins, Marc Soler and Nandu Jubany, among others, have decided to move to the Principality.
Below we will explain in detail what taxes there are in Andorra.
What are the main taxes in Andorra?
The main taxes in Andorra are:
- Personal Income Tax (PIT).
- Corporate Income Tax (CIT).
- General Indirect Tax (called IGI, equivalent to VAT).
- Tax on Real Estate Capital Gains.
- Andorra’s great tax advantage over countries such as Spain and France is the non-existence of wealth tax and inheritance and gift tax.
Likewise, in Andorra there is no obligation to declare or list assets abroad and the dreaded exit tax does not apply.
Personal Income Tax on Individuals
Personal income tax in Andorra is one of the most attractive and interesting taxes in the Euro zone. Its characteristics are as follows:
- A maximum tax rate of 10%, one of the lowest in the Euro zone. No progressive tax rate.
- Taxation on worldwide income. Deductibility of taxes borne abroad.
- Exemptions from €24,000 for real estate income, salaries and economic income, and reduction of taxation to only 5% up to €40,000. From €40,000 onwards they will be taxed at 10%. The brackets are as follows:
|from 24.000€ to 40.000€||5%|
|from 40.000€ upwards||10%|
- Exemption of the first €3,000 corresponding to savings income (dividends, interest, some capital gains).
In addition, there are many other tax advantages that are not so well known but very beneficial:
- Exemption for the sale of shares where you hold less than a 25%. In other words, no taxation on the sale of shares in listed companies (e.g. no taxation on the sale of shares in Amazon or Tesla).
- Exemption for dividends from Andorran sources.
- Very low taxation of real estate income.
- Maximum taxation on the sale of cryptocurrencies at 10%.
You can use this calculator to get a rough idea of how much tax you would pay in Andorra.
Corporate Income Tax in Andorra
In Andorra, companies will pay corporate income tax, a direct tax at a rate of 10% applied to net income.
It remains one of the lowest tax rates in Europe (below Ireland and Luxembourg, major technology hubs and financial centres) and with many tax advantages.
In 2018 and 2021, there have been tax modifications that have brought it into line with the highest international standards and make it an approved tax for most European jurisdictions. However, these modifications imply the elimination of pernicious regimes and leave in the air a possible increase in tax bases.
In this way, we could summarise attractive features of the Andorran IS as follows:
- Possible reduction of taxation by up to 2% through the application of the Patent Box regime.
- One of the few countries in the Euro zone with no limit on the compensation of Negative Taxable Bases (BINs) or the deduction of financial expenses.
- No withholding taxes on dividends or interest paid from Andorra to its foreign partners.
- Possibility of planning very interesting international tax structures through the Double Taxation Avoidance Agreements signed by Andorra (E.A.U., Malta, Cyprus, Luxembourg, etc.).
- Less frequent tax inspections than the European Union average.
- Non-application of the EU Directive on prior notification of cross-border mechanisms (DAC 6).
- General Indirect Tax in Andorra
- This is a tax levied on the exchange of goods and services carried out in the Principality, including imports. Unlike in Spain and France, where VAT is 21% and 20%, in Andorra the so-called IGI is only 4.5%.
In addition, Andorra levies a real estate capital gains tax on the sale of real estate in Andorran territory, a transfer tax on the acquisition of real estate from private individuals and a number of other local taxes.
Absence of taxes
The really interesting thing about Andorra is the absence of taxes such as inheritance and gift tax or wealth tax.
If you want to plan your family succession, your inheritance or not pay for the mere holding of financial assets, Andorra is undoubtedly your ideal destination.
At Relocate&Save we believe that Andorra is an ideal option for high net worth individuals who want to live in a quiet and safe place, or for people with short careers or dependent on external agents who want to save in their best professional years.
How to take the first step?
If you are seriously interested in changing your tax residence and in finding out more about Andorra’s taxes, please do not hesitate to contact us at [email protected] or download our free report “The 3 best tax destinations of the moment”, available below.